Global trade will decline in 2023 by about 5% from last year’s record as high borrowing costs weigh on economies, US-China tensions redirect supply chains and more policies restricting cross-border commerce emerge, a UN agency said.
The value of goods and services trade will reach $30.7 trillion compared with $32.2 trillion in 2022, according to the Geneva-based United Nations Conference on Trade and Development.
According to Bloomberg News, a $2 trillion, or 8%, slump in merchandise trade is the main reason.
Services trade this year will increase by $500 billion, or about 7%, from a year ago, UNCTAD said in a report Monday.
Lower costs for goods affected by high inflation a year ago are also a reason for the decline.
UNCTAD noted how countries aligned geopolitically are trading more with each other while those in disagreement are trading less bilaterally.
That divergence among several issues clouding the outlook for next year, the agency said.
Interest rates are also expected to remain relatively high in many economies as central banks attempt to tackle persistent inflationary pressures.
Commodity prices are expected to remain above pre-pandemic averages, especially for energy, food, and metals, Unctad said.
The UN body expects international trade patterns in 2023 to be affected by “near-shoring”, or relocating production processes closer to target markets, and “reshoring”, bringing manufacturing back to home countries, as companies focus on improving supply chain resilience.